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What are
CFD?
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Definition
CFD stands for Contract for Difference
(speculation on differences).
CFDs belong to the category of the derivatives and are a
finance product which gives the possibility to investors to
trade stocks, indexes, raw materials (e.g., gold and oil)
and so on in an easy and inexpensive kind.
The investor does not buy or sell the shares for real. A
bank institute realizes this for him. He has only one
agreement that the difference (profit or loss) of the
transaction - hence, the name
speculation on differences-
is determined in favour of his calculation.
CFDs are to be compared possibly to the other popular
derivatives like Turbo's, Warrants, Click Options and
Certificates. The offer CFD is much more comprehensive in
reality and the product is much easier at the same time.
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Advantages
- financial leverage with fixed
leverages
- very low fees (above all compared
with stock trading)
- Shortselling possibly on ALL
products
- about 3.000 tradeable products of
stocks like Adidas to raw materials like sugar
- Spread is identical with the Stock
Market Spread of the actual prices by Reuters
- all order types are possible, also
conditional and OCO order
- all stop kinds are possible, also
Trailing stop (without least distance)
- free platform with free real-time
quotation
- trade CFDs automated - find more
infos
here:
- Trade
examples
100 VW-stocks
at 100,00 €
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CFD
via broker |
stocks about online broker |
| Purchase value
(number x price) |
10,000.00 € |
10,000.00 € |
| Capital
expenditure (net) |
1000,00 € |
10,000.00 € |
VW rises within 3 days on 110 € |
| Market value |
11.000,00 € |
11.000,00 € |
| Profit (gross) |
1000,00 € |
1000,00 € |
| Fees (total)
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28,95 € |
45,00 € |
| Financing
expenses (3 days) |
5,12 € |
0,00 € |
| Clear profit
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965,93 € |
955,00 € |
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Yield |
96,59 %
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9,55
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Advantages of investment with CFDs
- the same risk even if the same
number of pieces is traded
less capital application and very low
fees! Therefore, break-even point is faster reached with
trade from CFDs.
not required capital can be used
for additional investments (risk dispersion)
if requested more commercial volume can
be moved with CFDs (Margintrading).
automated trading mor infos
hier:
Care with …
Do not go to the last extremity with
the
financial leverage.
Open no positions with maximum leverage effect. Otherwise
the position gets possibly under pressure too fast, provided
that the market does not behave to your advantage.
With CFDs on stocks to financing fees arise. These fees are
raised, because the bank, exactly like with a loan, the
position comes for you really. This payment of interest is
not very high (at the moment with 6% per year). However, it
is still a fact which you must include. However, it has
turned back also in such a way that the investor gets
interest credited by empty sales.
Brokers do not offer CFDs generally on all stocks. Smaller
values, values with little volumes or penny stocks are
traded only once in a blue moon as CFDs
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All infos about CFDs: Sing up on our e-mail
newsletter: click here
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